The central bank of the India Reserve Bank of India (RBI) said crypto has no underlying (underlying asset). The warning was delivered by the head of RBI Shaktikanta Das after the Indian government decided on the tax framework related to crypto. Das considers that cryptocurrencies issued by private parties and not central banks are a major threat that has the potential to shake financial and macro-economic stability. Therefore, investors should be warned about the risks of crypto investing.
“Private (developed) cryptocurrencies are a huge threat to macro-economic stability and financial stability… investors should be warned that they are investing at their own risk,” Das said at a press conference after the monetary policy meeting.
“And these cryptocurrencies have no underlying (value) – not even tulips,” Das added.
Tulip is meant by Das refers to the events that occurred in the Netherlands in 1600, which became a parable for human greed. At that time, investors invested in tulips because the demand was soaring. Not long after, the price of tulips plunged, causing investors to suffer losses. After Indian central bank officials warned that cryptocurrencies developed by outsiders could undermine financial stability, RBI plans to launch its own digital currency. The digital rupee is rumored to be launching in 2023. To date crypto investors in India are estimated to be around 15 million to 20 million investors. In total, their crypto holdings are worth 400 billion rupees.
"The introduction of a central bank digital currency will give a boost, a big boost to the digital economy," said Nirmala Sitharaman while presenting the state's annual budget. “Digital currencies will also lead to more efficient and cheaper currency management systems.”
Sitharaman did not provide details on how the digital rupee would work or what it would look like, but said it would be introduced "using blockchain and other technologies." Blockchain refers to a technology that was originally created with bitcoin, but the definition has evolved as its applications have gone beyond cryptocurrencies. India will be one of the largest economies in the world to introduce a central bank digital currency. Therefore, in the midst of the explosion of cryptocurrencies in various parts of the world, novice investors are expected to conduct independent research or DYOR (Do Your Own Research) and study it first before investing their money in crypto given the very high volatility.
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